The semiconductor industry appears to be back on track with its objective of $1 trillion by 2030. Artificial intelligence will lead the way, according to researchers.
The semiconductor industry had another one of its rollercoaster years in 2024. The latest swing left many companies bruised, with suppliers facing persistently weak markets and suffering high single-digit to double-digit revenue declines from the prior year. That was the bad news, one that many in the industry were expecting. What they weren’t anticipating was a quick snapback in revenue for the market. The industry didn’t witness the negative revenue slide that some analysts had predicted earlier. Rather than decline, semiconductor revenue grew year-over-year, climbing more than 19 percent, to $627.6 billion, compared with $526.8 billion, in 2023. The increase was a surprise considering many analysts had predicted continuing softening of the market due to weakness and inventory depletion efforts in the automotive and industrial sectors. Furthermore, 2024 set a record for sales in the semiconductor industry, according to John Neuffer, CEO of the US Semiconductor Industry Association (SIA). “The global semiconductor market experienced its highest-ever sales year in 2024, topping $600 billion in annual sales for the first time, and double-digit market growth is projected for 2025,” Neuffer said. “Semiconductors enable virtually all modern technologies – including medical devices, communications, defense applications, AI, advanced transportation, and countless others – and the long-term industry outlook is incredibly strong.”
It is going to get even better, according to researchers. The industry had for years projected annual sales would top $1 trillion by 2030, but the forecast ran into problems two years ago. An unexpected dip in revenue started the slide, followed by excess inventory in the distribution channels and in several sectors, including automotive and industrial. Within the automotive segment, the ongoing platform shift to electric vehicles (EV) from internal combustion engine (ICE) system further complicated the market outlook. Rising demand for EVs in China, the world’s biggest market for automotives, added to pressures on their European and North American counterparts and resulted in sales declines at auto IC vendors. Despite these challenges, the semiconductor industry grew in 2024 with high sales of microprocessors and graphic processors headed into the server and data industry for artificial intelligence programs.
Demand for high bandwidth memory (HBM) also increased dramatically, pushing up sales at semiconductor companies serving the segment, including Hynix and Micron. The strong demand for HBM continued through 2024 and is seen roaring through 2025 and beyond as OEMs producing AI processors ramp production to meet surging requirements for servers from data companies and cloud services providers, all of them asking for higher DRAM in the finished products. “Several semiconductor product segments stood out in 2024,” the SIA said, in a statement. “Sales of logic products totaled $212.6 billion in 2024, making it the largest product category by sales. Memory products were second in terms of sales, increasing by 78.9 percent in 2024 to a total of $165.1 billion. DRAM products, a subset of memory, recorded an 82.6 percent sales increase, the largest percentage growth of any product category in 2024.
One trillion dollars by 2030
The recovery recorded by the chip industry in 2024 was not widespread. Companies like NXP, STMicroelectronics, and Texas Instruments recorded lower year-over-year sales for the December quarter while others suffered with across-the-board declines in market segments. At TI, fourth quarter “Revenue decreased 16 percent from the same quarter a year ago and 10 percent sequentially, as revenue declined across all end markets,” said Haviv Ilan, president and CEO, in a statement.
The negative performance outside the AI chips segment hides one interesting shift in the industry, according to observers. While sales dipped in 2023, leading to suspicions revenue could crater in 2024, the fact that this did not happen and the strength in the AI chips market was considered auspicious for the industry. In fact, the double-digit revenue growth in 2024 and another one expected this year imply the chip market is on track to achieve $1 trillion in sales by 2030, said Pierre Cambou, principal analyst at Yole Group. “A new growth cycle is expected to continue over the next three to four years, driven by demand in servers, automotive, computing, and industrial market segments,” Cambou said. “These factors will propel the semiconductor industry toward a $1 trillion market by 2030.”
AI will power the predicted growth for the next several years. Other market segments will pitch in too, as they recover from the current inventory overload. Yole said they expect demand for servers to remain robust, estimating it could generate revenues of $390 billion by the end of the decade. They are predicting a rebound in demand for auto chips will push the sector to sales of $112 billion by 2030, accounting for approximately one-tenth of the industry. “Yole Group’s analysts also emphasize the computing market’s active role over the next five years, with a 6 percent growth rate expected to push it to $150 billion by 2030,” said the French semiconductor consulting and accounting firm, in a statement. ‘From a component standpoint, DRAM, NAND, and processors will drive the semiconductor devices industry, maintaining a steady growth rate of 7 to 8 percent through 2030.”
Not all regions will benefit from the higher revenue projected, however. North America, which has led the development of AI, will remain one of the strongest markets, followed by China. The flood of restrictions and import controls by the US government on the transfer of high-end computing and data server chips to China and certain other parts of the globe may result in lower sales of the components in the countries impacted, according to observers. However, China is fighting back, leveraging existing resources to increase the production of AI chips in its territory. How the jostling of the combatants will impact the semiconductor industry is not certain, according to industry sources. However, what’s clear is that demand for AI chips will remain robust for many years to come, they said.
